Addressing Climate Change

by Carl Edward Rasmussen, 2024-06-09, 5 minute read

Our atmosphere is a shared, common resource. Overexploitation by emission of large quantities of greenhouse gases causes climate change, with destructive consequences for humanity. It is clear that the appropriate response is to use less fossil fuels. But it is less clear by what mechanism this can be achieved?

Avoiding rampant climate change is essentially a question of cooperating globally over our common atmospheric resource. Human cooperation is widespread and the necessary conditions for its existence are well understood. These include: clear responsibilities, commitments, transparency and trust. Tragically, all these necessary conditions are absent from the Paris Agreement (PA), our flagship international treaty on climate change. The PA thus suffers from fundamental structural deficiencies which will practically guarantee its failure to limit the rise of global temperature to +1.5°C (or +2.0°C) over preindustrial levels.

The root cause of increasing atmospheric CO2e concentrations, and therefore climate change, is that in practice our atmospheric resource is valued at zero. It is what economists refer to as an unpriced externality, ie it is held outside our accounting systems. In other words, you can discharge unwanted CO2e into the atmosphere, thereby using a valuable resource, without charge. Many influential economists favour carbon fee and dividends as an efficient mechanism to price carbon and reduce emissions.

Most people agree that the only reasonable answer to the question "Who owns the atmosphere?" is: all of us. And that you should pay the owner for resources you use. It would therefore be fair and equitable to distribute the money raised from a carbon fee equally between member nations according to the size of their populations. It would have the effect of transferring wealth from rich, industrialised nations with large per capita CO2e emissions, to countries in the global south, who have generally contributed little to climate change, and need the investment.

The Equitable Atmosphere Climate Cooperative (EACC)

How could these principles work in practise, and how can the deficiencies of the PA be avoided? Firstly, since the world consists of sovereign nations, the mechanism has to be implemented as a voluntary cooperative. Secondly, to ensure transparency and trust, the cooperative needs to work on a rapid, annual cycle, allowing members to continually monitor the cooperation of their partners. Finally, a mechanism is needed to adapt the price of carbon.

Here is a simple, concrete proposal for such a cooperative. It is based around a single number, the price per ton of CO2e, p. The Equitable Atmosphere Climate Cooperative is fully defined by a four point annual cycle:

  1. at the beginning of the year every nation is invited to join for the year at the pre-specified price p
  2. at the end of the year, each nation reports their emissions (according to UN FCCC rules) and pays the price times the emissions
  3. the cooperative immediately redistributes all the proceeds in proportion to the population of the member countries
  4. members vote on next year's price p, open ballot, median vote, one vote per country.
The first year the price is fixed at zero, so every nation can join for free. In subsequent years it is easy to see that the effect of membership depends only on the annual per capita emissions of a nation: nations with higher per capita emissions than the average member will be net contributors, countries will smaller per capita emissions will be net beneficiaries. Membership immediately creates economic pressure to cut emissions (for all members, not just large emitters). Nations are able to join conditionally, ie only if other nations join (avoiding prisoner's dilemmas). The cooperative allows complete freedom for members to determine how to raise contributions and utilise the rebates. The cooperative is simple, fully transparent, there is no room for any type of negotiation (which brought down the Kyoto Protocol). The price, p will evolve over time by voting. Small emitters may favour a higher price, but not so high as to dissuade larger emitters from joining.

Low per capita emitters would be net beneficiaries, but why would large per capita emitters join? For several reasons: it's a just, equitable proposal; it would be effective in addressing climate change to the benefit of all nations; the mere existence of the cooperative would force countries to show their true colours: you cannot hide behind promises about your behaviour in the distant future. The cooperative could be effective even without universal membership. Once established, member countries would probably erect trade barriers against free-riders.

The EACC in the real world

How can this scheme be implemented in practice? Firstly, climate change is a global problem, national and international efforts only make sense in concert. Much environmental activism is centered on protest; instead, the EACC is a constructive proposal to rally around. To make it a reality in democracies, we have to answer the question "what is in it for me?". The answer is in the long term, cooperation over our common shared resources is beneficial to everyone. The warning signs are many and clear, of the consequences of continued short term overexploitation.

The EACC relies on simple, sound, fair and equitable principles which respect the necessary conditions for cooperation. Its foundation is that the atmosphere is a finite, valuable resource; we shouldn't treat it as an unpriced externality. Instead, if you use it, you should pay for it. The EACC is radically different from the Paris Agreement (PA), it can co-exist with it, and enhance the chances of success by providing mechanisms that can help strengthen PA pledges and their likelihood of fulfilment. The Equitable Atmosphere Climate Cooperative proposal is concrete and practical. Tell your friends about it.